Understand the complexities and nuances of the Bankruptcy Code to better advise clients and prepare for court.
By Daniel Gill
Aug. 26 — The U.S. Trustee Program announced Aug. 25 that it has reached an agreement with Wells Fargo Bank, N.A. requiring the bank to pay close to $3.5 million in remediation on account of 8,000 homeowners in Chapter 13 bankruptcy.
Wells Fargo and the USTP filed an amendment to a prior settlement entered in a Maryland Chapter 13 bankruptcy case on Nov. 19, 2015 ( In re Green, Bankr. D. Md., No. 11-33377-TJC, 8/25/16 ), according to a press release sent to Bloomberg BNA.
The amendment is the result of an independent reviewer's oversight of Wells Fargo practices with regard to filing and serving payment change notices in active Chapter 13 cases, and increase payments to be made by the bank by approximately $3.5 million. Wells Fargo previously agreed to pay about $81.6 million in remediation for “its repeated failure to provide homeowners with payment change notices (PCNs) as required under federal bankruptcy law,” the USTP, a branch of the U.S. Department of Justice, told Bloomberg BNA in an Aug. 25 e-mail.
Cliff White, the Director of the Executive Office for U.S. Trustees (EOUST), praised Wells Fargo for its role in the settlement: “It also shows cooperation and self-reporting by Wells Fargo, which responded to the [independent reviewer] by conducting an internal review and then disclosing to the USTP the systemic nature of its violations,” he said in a statement sent to Bloomberg BNA.
The settlement arose in the Chapter 13 case of Ernestine C.J. Green, filed Nov. 30, 2011. Chapter 13 bankruptcy allows individuals receiving regular income to obtain debt relief while retaining their property. To do so, the debtor must propose a plan that uses future income to repay all or a portion of his debts over a three to five year period.
A debtor with a home mortgage can continue to pay the mortgage, or sometimes the Chapter 13 trustee appointed in the case pays the mortgage with funds provided by the debtor's earnings. Mortgagees or mortgage servicers are required under Bankruptcy Rule 3002.1 to file and serve notices when the mortgage payments change during the course of the Chapter 13 case.
After it became apparent that Wells Fargo did not properly file its PCNs in Green's case, the EOUST approached the bank with concerns about the bank's compliance with the rule, not just in Ms. Green's case but in all its mortgages for Chapter 13 debtors, the court said in its Nov. 19, 2015 order approving the earlier settlement.
The November 2015 settlement contemplated that Wells Fargo would engage an independent reviewer to identify potential systemic issues in the bank's operations. “That compliance monitoring led to the discovery of a deficiency in Wells Fargo's processes and procedures relating to the certificates of service filed with the PCNs” between 2011 and 2016, Jane Limprecht of the USTP told Bloomberg BNA. The deficiency caused “thousands of homeowners” to receive their change notices with fewer than the 21 days notice required before payment changes could take effect, she said.
The new settlement will provide refunds and credits to affected consumers, and Wells Fargo will change its processes and procedures to prevent recurrence of the problem. The bank also agreed to submit to further compliance monitoring by the independent reviewer, the USTP told Bloomberg BNA.
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